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TMI Blog2022 (5) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... the application was that the panch/ commissioner would submit the report to the court after conducting an audit of the accounts. The application cannot be read as an application moved on a prior agreement or consensus for reference to arbitration. Order XXVI Rule 9 of the Code gives wide powers to the court to appoint a commissioner to make local investigations which may be requisite or proper for elucidating any matter in dispute, ascertaining the market value of any property, account of mesne profit or damages or annual net profits. Under Order XXVI Rule 11, the court has the power to issue a commission in a suit, in which examination of adjustment of accounts is necessary, to a person as it thinks fit directing him to make such examination or adjustment. When a court issues such a commission to such a person, it can direct the commissioner to make such an investigation, examination and adjustment and submit a report thereon to the court. The commissioner so appointed does not strictly perform a judicial act which is binding but only a ministerial act . Nothing is left to the commissioner s discretion, and there is no occasion to use his judgment or permitting the commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osal of the present appeal. The civil suit will be decided on merits without being influenced by any findings recorded by us that only relate to the limited aspect of the report dated 22nd June 1995 of the commissioner. Application disposed off. - CIVIL APPEAL NO. 1973 OF 2022 - - - Dated:- 11-5-2022 - SANJIV KHANNA And BELA M. TRIVEDI , JJ. For the Appellant : Ms. Ankita Choudhary, DAG Mr. Himanshi Shakya, Adv. Mr. Sunny Choudhary, AOR Mr. Abhinav Shrivastava, Adv. Mr. abhimanyu Singh, Adv. For the Respondent : Mrs. Pragya Baghel, AOR JUDGMENT SANJIV KHANNA , J. The legal issue arising in the present appeal is whether the parties had agreed that the subject matter of the suit or a part thereof should be referred to arbitration under Section 21 of the Arbitration Act, 1940. We are examining the provisions of the Arbitration Act, 1940 and consequently, the observations and the findings recorded should not be without proper appreciation of the principles applied to the proceedings under the Arbitration and Conciliation Act, 1996. 2. On 03rd September 1993, the respondent before us - M/s. Modi Transport Service, The plaintiff , for short a partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the plaintiff by the defendant. Subsequently, the defendant had issued a telegraph asking the plaintiff not to transport coal. The plaintiff had to arrange for a plot to store the coal for which he had to pay a rent of Rs.10,000/- (rupees ten thousand only) per month and incur security expenses of Rs.5,000/- (rupees five thousand only) per month for up to five months. 4. The defendant contested the suit by filing a detailed written statement. As per the defendant, it was an essential duty of the plaintiff to lift the coal offered only on being satisfied that the coal was of good quality. The plaintiff had lifted good quality coal from the collieries against the release orders of the defendant, but low quality of coal was delivered to the defendant. The defendant was cheated. The representatives of the plaintiff were informed about the low quality of coal on account of excessive moisture, and stone and dust being mixed with the coal. The truck drivers had showered water on the coal to intentionally increase the weight of the coal before delivery. Letter dated 05th June 1992 in this regard was issued by the defendant to the plaintiff. The plaintiff was to be paid transportation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stated above, the plaintiff had not quantified the amount payable therein and had sued for settlement of accounts regarding the quality of coal transported. They had also prayed for the interest @ 2% which, it appears, was the amount claimed as payable per month. For valuation, the plaint had fixed the value of the suit at Rs.1,00,000/- (rupees one lakh only) and a court fee of Rs.8,180/- (rupees eight thousand one hundred eighty only) was paid with the statement that excess court fee could be deposited after the amount was quantified. However, a number of contestations inter se parties were raised like the rate and quantification of the transport charges, lapses and alleged failure by the plaintiff on different accounts, the deductions made by the defendant and the plaintiff s liability to pay interest on excess payments made. 6. During the pendency of the said suit, the plaintiff had filed an application before the First Additional District Judge, Sehore, which reads: COURT: FIRST ADDITIONAL DISTRICT JUDGE, SEHORE (M.P.) CIVIL SUIT NO. 16B/93 M/s Modi Transport Service ..Plaintiff Versus M.P. Rajya Tilhan Sangh etc. Defendant Application for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty has any objection. Hence the application is accepted. The fee of the arbitrator will be payable according to the fee prescribed in the schedule of the Arbitration Council of India immediately, if the Arbitrator demands fee, both the parties should pay half the fee to the arbitrator before settlement of the matter. The final liability of the fee will depend on the settlement of the fees of the case. A notice to this effect on behalf of the Sessions Court for appointment of the arbitrator. The arbitrator should present his decision within the stipulated period by giving notice to the parties concerned and this matter should be placed before me at the appointed time after being presented in the Arbitration Court. Dated: 23.12.1994 8. Pursuant to the said order, the court sent the following letter dated 23rd January 1991 to S.K. Mantri, Chartered Accountant, Sehore: COURT OF FIRST ADDITIONAL SESSIONS JUDGE, SEHORE (M.P.) Sr. No 11/ Sehore Dated 23.01.1995 To, Sh. S.K. Mantri Chartered Accountant Sehore. In Suit No. 11/93 of this Court titled Modi Transport Vs. Tilhan Sangh, you have as appointed as Panch. You by conducting audit of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the report as to the basis on which it was prepared reads: That the report has been prepared on the basis of records (accounts) which have been presented to me by the plaintiff and the opposition till date 31.05.95, which is presented before your goodself. 11. Order dated 22nd June 1995 passed by the court mentions that the arbitrator has presented his report and documents along with the list. If the parties have any objections regarding the arbitral report, then they should appear on the next date. 12. The defendants filed objections, inter alia, on different grounds challenging the report, which objections were decided by the court of Additional District Judge, Sehore, vide order dated 16th May 1996. He held that S.K. Mantri had been appointed as an arbitrator as provided under Section 21 of the Arbitration Act. The defendant's contention that S.K. Mantri was appointed as a commissioner under Order XXVI Rule 9 of the Code of Civil Procedure, 1908 the Code , for short was rejected. Further, the objections to the award filed on 01st November 1995 were beyond 30 days and barred by limitation. Counsel for the defendant was present in the court when the arbitrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction under Section 21 of the Act. Word agree means any arrangement or understanding or action in concert. See Section 2 of the Contract Act which vide clause (a) defines proposal, clause (b) which defines when proposal is accepted, clause (e) which states that every promise and every set of promises, forming the consideration for each other, is an agreement and clause (h) which states that an agreement enforceable by law is a contract Clause (h) also has two sub-clauses. The Indian Contract Act,1872 states that an agreement may be oral or in writing, albeit the command of Section 21 of the Act is that the parties should apply to the court in writing for an order of reference. In the context of Section 21, the court can refer a dispute/difference subject matter of a suit when the parties mutually agree to arbitration. There must be a joining or meeting of minds between the parties to go for arbitration in respect of a subject matter in a pending suit. Felthouse v. Bindley (1862) 142 ER 1037 states that the parties agree when they wilfully agree to perform certain acts or refrain from doing something. The parties should be agreed about the subject matter at the same t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on does not validate the reference which was void ab initio. Calcutta and Madras High Courts have also taken a similar view. The question was considered by a Full Bench of the Calcutta High Court in Laduram v. Nandlal, Mookerjee, J., at page 114 of the report observed as follows:- The foundation of jurisdiction here is the agreement amongst all the parties interested that the matters in difference between them shall be referred to arbitration. If all the parties interested do not apply and yet an order of reference is made, the order is illegal because made without jurisdiction. If an award follows on the basis of that reference, it is equally illegal, because it is founded upon a reference made without jurisdiction. See also Seth Dooly Chand v. Munuji and others and Khan Mohmed v. Chella Ram and another and Subha Rao v. Appadurai. In Subha Rao v. Appadurai, Devadoss, J., while considering the provisions of para 1 of Schedule II, Civil Procedure Code,-which in substance is the same as section 21 of the Arbitration Act-observed as follows:- What gives the Court jurisdiction to refer the matter to arbitration is consent of all the parties. Consent subsequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report to facilitate the court. The role assigned to S.K. Mantri is also clear from the letter of appointment dated 23rd January 1995 which states that S.K. Mantri has been appointed as a panch and would be conducting an audit of all disputed accounts of both sides, and that he should send a report to the court. Distinction between an arbitrator and expert; and an arbitrator and a commissioner has been examined and discussed below The letter also mentions that on receiving your remuneration report, payment would be made to you in the court . Secondly, the court s jurisdiction to finally decide was not questioned or annihilated. In fact, the court always remained in the picture, exercised parley as an adjudicator having dominion over the subject matter of the suit. 20. However, the plaintiff has placed reliance on the order dated 23rd December 1994 to submit that the defendant had agreed to arbitration. It is, therefore, necessary for us examine the contents of the order. The first portion of the order records that the plaintiff has made an application for settlement of accounts and that the accounts can be examined only by a well-educated Chartered Accountant. A copy of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruction Co. (P) Ltd., (2010) 8 SCC 24 which is to the following effect: 33. Even if there was no pre-existing arbitration agreement, the parties to the suit can agree for arbitration when the choice of ADR processes is offered to them by the court under Section 89 of the Code. Such agreement can be by means of a joint memo or joint application or a joint affidavit before the court, or by record of the agreement by the court in the order-sheet signed by the parties. Once there is such an agreement in writing signed by parties, the matter can be referred to arbitration under Section 89 of the Code; and on such reference, the provisions of the AC Act will apply to the arbitration, and as noticed in Salem Bar (I), the case will go outside the stream of the court permanently and will not come back to the court. 24. Thereafter, Kerala State Electricity Board (supra), made a reference to a similar view expressed by this Court in Shailesh Dhairyawan v. Mohan Balkrishna Lulla, (2016) 3 SCC 619 which stated that resort to arbitration in a pending suit by the orders of the court would only be when parties agree for settlement of the dispute through arbitration. Thus, reference t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial to the agreement, the agreement is void. Explanation.-An erroneous opinion as to the value of the thing which forms the subject-matter of the agreement, is not to be deemed a mistake as to a matter of fact. of the Contract Act, which provides that where both the parties to an agreement are under a mistake as to a matter of fact essential and integral to the agreement, the agreement is void. However, this does not apply if the mistake relates to an erroneous opinion as to the valuation of the thing that forms the subject matter of the agreement. A mistake as to the quality of an article or attributes on the other hand is a debatable question as it may not always lead to the conclusion that the contract is void. Further,, this provision relating to the voidness of the contract does not apply to cases of a common mistake of fact, as distinguished from a mutual mistake made or entertained by each of the persons towards or with regard to each other. Where a party is mistaken as to the other's intention, though neither realises that the respective promises have been misunderstood, there is a mutual mistake. The ascertainment of whether or not there was a mutual mistake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsent of the parties or from an order of the court or from a statute, the terms of which make it clear that the process is to be an arbitration, (3) the agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal, (4) that the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides, (5) that the agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law and lastly, (6) the agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal. 29. K.K. Modi (supra) refers to Russell on Arbitration, 21st Edn., at page 37, para 2-014 which observes that whether a chosen form of dispute resolution is expert determination or arbitration is a matter of construction of a contract that involves an objective enquiry into the intention of the parties. Specific words like arbitrator , arbitration proceedings or an expert and not an arbitrator can be used to describe how the disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary scientific/technical criteria so as to enable the judge to form his own independent judgment by the application of these criteria to the facts proved in evidence. Vide Lord President Cooper in Davis v. Edinburgh Magistrate, 1953 SC 34 quoted by Professor Cross in his Evidence. 32. There is also a distinction between the scope and functions of an arbitral tribunal and a commissioner appointed under Order XXVI Rules 9 and 11 9. Commissions to make local investigations. In any suit in which the Court deems a local investigation to be requisite or proper for the purpose of elucidating any matter in dispute, or of ascertaining the market-value of any property, or the amount of any mesne profits or damages or annual net profits, the Court may issue a commission to such person as it thinks fit directing him to make such investigation and to report thereon to the Court: Provided that, where the State Government has made rules as to the persons to whom such commission shall be issued, the Court shall be bound by such rules. xx xx xx 11. Commission to examine or adjust accounts. In any suit in which an examination or adjustment of the accounts is neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd adjustment and submit a report thereon to the court. The commissioner so appointed does not strictly perform a judicial act which is binding but only a ministerial act . Nothing is left to the commissioner s discretion, and there is no occasion to use his judgment or permitting the commissioner to adjudicate and decide the issue involved; the commissioner s report is only an opinion or noting, as the case may be with the details and/or statement to the court the actual state of affairs. Such a report does not automatically form part of the court s opinion, as the court has the power to confirm, vary or set aside the report or in a given case issue a new commission. Hence, there is neither abdication nor delegation of the powers of functions of the court to decide the issue. Sometimes, on examination of the commissioner, the report forms part of the record and evidence. A. Nagarajan v. A. Madhanakumar 1996 SCCOnLine Mad 17 The parties can contest an expert opinion/commissioner s report, and the court, after hearing objections, can determine whether or not it should rely upon such an expert opinion/commissioner s report. Even if the court relies upon the same, it will merel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the accounts. The issues and questions of dispute in the suit were far broader and wider. These included questions as to the agreed price or the rate of transportation in view of the letter dated 05th June 1992, which was withdrawn by letter dated 30th September 1992, computation of the transportation costs payable to the plaintiff under the contract in case the coal delivered was within or beyond the 1% stipulation, whether or not the defendants were right in making deductions on account of bad quality coal, higher moisture content etc. whereby the weight of the coal had increased, delay in delivery on the part of the plaintiff, whether the defendants are entitled to charge interest while making recoveries, etc. It is interesting to note that the S.K. Mantri himself did not decide whether or not the plaintiff is entitled to rent of the plot or security charges observing that this was an aspect for the court to decide. However, he forgot that his jurisdiction was limited to checking and verifying accounts and not deciding any issue or questions beyond the accounts on issues and questions referred to above. 36. In view of the aforesaid discussion, we allow the present appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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